Billabong shareholder looks to oust board except Merchant, Paull

Billabong shareholder Coastal Capital International has called for a general meeting to remove Gordon Merchant and Collette Paul from the board as well as to amend the constitution to enable shareholders to approve future debt or equity financing arrangements and wants to appoint its own representatives to the board.
Photo: Glenn Hunt

Billabong
’s future is once again up in the air after its newest shareholder, US investor Coastal Capital, moved to spill the board and potentially overturn ­support for a $395 million refinancing proposal from the Altamont and Blackstone consortium.

Coastal, which emerged with a 5 per cent stake last month, wants to appoint two of its directors, managing partners Vlad Artamonov and Todd Plutsky, and kick out all of Billabong’s directors with the exception of founder
Gordon ­Merchant
and his friend
Colette Paull
, who together own 16 per cent.

Mr Plutsky and Mr Artamonov are directors and major shareholders in
Redbank Energy
, (formerly Alinta Energy) which was suspended on Monday after failing to lodge its accounts.

Coastal is believed to support a rival $325 million refinancing offer from US hedge funds Oaktree Capital and Centerbridge Partners.

There were also suggestions on Monday that Coastal may be working with Mr Merchant and Ms Paul, or other shareholders such as Franklin Resources, to remove the board and ensure that all offers are considered.

However, other sources played down the likelihood of Mr Merchant working with Coastal. “He wants someone who can invest in the core brands – the last thing he wants to support is a serial pest like Coastal who is in it for short-term gain," one source said.

Analysts and investors believe that yet another offer could emerge for the beleaguered surf and skate wear retailer, which has fielded five takeover and refinancing offers in two years.

“If they’re in cahoots with Merchant they might do a buy out or get together with private equity," said one fund manager. “There should have been a board spill ages ago."

Related Quotes

Company Profile

Coastal has requisitioned a meeting under section 249D of the Corporations Act and wants to remove six directors, including chairman Ian Pollard and Altamont’s representatives, Keoni Schwartz and Jesse Rogers.

Coastal also wants to amend the company’s constitution to enable shareholders to approve future debt or equity financing arrangements. Coastal would need the support of shareholders holding more than 50 per cent of the shares to vote a director off the board and appoint its representatives.

The board has 21 days to respond to Coastal’s request and another two months to comply. In this case, the meeting requisitioned by Coastal may not be held until after shareholders meet to approve the equity component of Altamont’s recapitalisation plan.

The Billabong board appears intent on sticking to its original time frame, despite the unwelcome interruption from Coastal.

“The board does not anticipate that this action by Coastal Capital International will cause any delay or deferral of the company’s process to complete the long term financing," the company said.

Mr Pollard indicated last week that the board remained in favour of the Altamont consortium’s package as it offered a total solution to Billabong’s woes, including the appointment of former Oakley chief
Scott Olivet
as chief executive and a long-term recovery plan.

Altamont: focus on completing the deal

Altamont insisted its proposal was in the best interests of all stakeholders and stepped up its lobbying efforts with shareholders.

“The Altamont Consortium transaction means Billabong, after many months of uncertainty, finally has a clear path toward the future and to realising the tremendous potential we see in its portfolio of exceptional brands," Altamont said.

“We are here as committed long-term partners for the company and will continue to work with the board, Scott and the rest of the management team to reinvigorate Billabong’s businesses and brands, and to restore shareholder value," the consortium said.

The uncertainty is taking a heavy toll on Billabong, which last week reported a bottom line loss of $860 million and wrote down the value of its once iconic Billabong brand to zero.

Another two senior executives departed last week – Von Zipper vice president Vince De La Pena and Von Zipper founder and director of design and merchandise Rob Riese.